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Emerging market shares fall further as traders react to inflation and dollar strength

Emerging equity markets fell deeper on Friday, while European stocks and US futures rallied, as traders focused on the developed world’s recovery from the pandemic but avoided countries whose growth rates are threatened by high inflation and lower vaccination rates.

The FTSE’s index of emerging market stocks fell about 0.3% on Friday morning in US dollar terms, bringing weekly losses to more than 1.2%. In the previous day’s trading, the index fell the most since September. It is up just 0.8% so far this year.

By contrast, futures that track Wall Street’s S&P 500 stock index, which closed at an all-time high on Thursday, were up 0.4 percent. Europe’s Stoxx 600 is up around 0.4%, also trading at an all-time high.

Investors’ appetite for emerging market assets has waned this year as China’s growth slows due to the coronavirus lockdown and measures to curb regulations on businesses. technology as well as borrowing and speculation in the economically important real estate sector.

Analysts also attribute a stronger dollar and moves by the US Federal Reserve towards tightening monetary policy as it creates harsher financial conditions for emerging market companies. and governments borrow in reserve currencies, while inflation threatens to dampen consumer spending.

“There is a set of headwinds for emerging markets. Ross Mayfield, investment strategist at RW Baird, said.

Economic growth of the United States and the euro area is is expected to be just right in 2022 compared with this year’s levels due to ongoing pandemic-related supply chain shortages and higher energy prices, but the size of the recession in some developing countries is expected to be clear. clearer.

Barclays strategists forecast China’s gross domestic product growth to slow from 7.8% this year to 4.7% in 2022. They expect the US economy to expand 5.5% next year. 2021 and 4% in 2022, similar to that of the euro area. trajectories, as households spend excess savings accumulated during pandemic and fiscal stimulus programs, such as the US president’s $1.2 billion infrastructure bill Joe Biden has supported business psychology.

The dollar index, which measures the US currency against six others, trades near a 16-month high on Friday. The South African rand fell 0.2 percent to $15.6/USD, its lowest level in more than a year.

In Asia, Hong Kong’s Hang Seng stock index fell 1%, as consumer and technology shares pulled back. On Thursday, Chinese e-commerce group Alibaba cut its sales forecast, citing slowing growth in consumer spending in the world’s second-largest economy.

The Nikkei 225 in Tokyo closed 0.5% higher as Japanese Prime Minister Fumio Kishida prepared a $350 billion economic stimulus package involving a 100,000 yen ($873) direct cash distribution to households.

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